Hybrid Long Term Care

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This is the Truth Network. Welcome to Finishing Well, brought to you by cardinalguide.com, with certified financial planner, Hans Scheil, best-selling author and financial planner, helping families finish well for over 40 years. On Finishing Well, we'll examine both biblical and practical knowledge to assist families in Finishing Well, including discussions on managing social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes.

Now let's get started with Finishing Well. Darrell Bock Finishing Well is a general discussion and education of the issues facing retirees. cardinalguide.com, Cardinal Advisors, and Hans Scheil CFP sell insurance. This show does not offer investment products or investment advice. Welcome to Finishing Well, with certified financial planner, Hans Scheil.

Today's show is hybrid, which is kind of a new word, a fun word if you're in the car business, hybrid long-term care. And so as we talk about hybrid long-term care, one of the first things that came to my mind as I thought about this show was what Jesus told us over and over again in the Gospels. He says in Luke chapter 9, I think Matthew 17, and you're gonna be familiar with this a little bit, but he says, deny yourself, take up your cross, and follow me. Well, that word deny yourself is a fascinating thing when it comes to the concept of finishing well. Because if I'm gonna finish well, right, I have to deny that I have the ability to get myself into heaven.

It was Jesus' death on the cross in order for me to be able to do that. Well, in a finished well, I've interestingly got to deny to some extent my own ability to completely care for myself through the end of my life, just like I didn't have the ability when I was born to feed myself or to take care of myself when I need to go to the bathroom, that kind of thing. Well, you know, as we come into this stage of our life, are we really planning for this concept of denying ourselves that, hey, I'm gonna need forces outside of my own ability in order to feed myself? As I come into the end, whatever that may be. Now, it could be that obviously I get in a car accident and I'm not disclosing that, but for most of us, we're gonna come out of this world like we went into this world, in a slow, steady kind of thing where at some point in time, Hans, we're not able to feed ourselves, take ourselves to the bathroom, and that kind of thing.

Well, that's absolutely right. And really the issue, we're getting ready to lay some real head stuff on you and talk about this hybrid long-term care and throw some facts and figures. And what I did in preparation for the show, I said before we get into that stuff and go to logic, we really need to get to the heart of the issue here because all that logic is not gonna do any good unless you, the listener, are in a point or in a place where you're saying, yeah, I got a problem here and I wanna look for a solution.

And then we're talking about the solution, but that doesn't do any good until you've accepted and you've recognized the problem. So, and I wanna thank you for really coming up with a connection here in scripture and which you did, Robbie, and it's just, it's fantastic. It's had an impact on me this morning. It's got an impact on me. Obviously all these shows and as we've discussed this topic, but so often I wanna be independent and take care of myself and including my own salvation, however that worked, but that just isn't what God had in mind is at some point in time, we have to trust God.

And part of what we did was we turned on this radio show today because we're looking at finishing, well, we wanna do that with God and we wanna pray about these things and say, let's take a really hard, not denying Christ, but denying ourselves and saying, what would this look like to finish well through that actual stage of my life. And from my standpoint, when I first heard about this idea of a hybrid long-term care, I was like, man, this is really, really some neat stuff that just happened as I found out through a tax law change. Well, yeah, the Pension Protection Act, which became law along about 2006, 2007, and it really wasn't about this. It was about making your pension safer, but then a little piece of it that was just kind of thrown in there, they said, we're gonna allow life insurance and annuity policies. We're gonna allow money to come out of those before death to the person that owns the policy.

I'm just trying to simplify this. We're gonna allow for long-term care payments. So if you need home healthcare and you do it all properly, you can take money out of one of these hybrid life long-term care policies or hybrid long-term care annuity policies. It didn't matter, it could be either one where you've had tax-free or tax-deferred growth inside of the policy, which life insurance policies tend to do that, and you can pull money out of them before you die or before they were gonna pay off otherwise to pay for long-term care.

And so that's kind of an oversimplification. And so the IRS and the tax code, and really Congress passing this 14 years ago, they created these and they said this is gonna be a tax-free event so you can get the money out to pay for care and literally never pay taxes on it. Right, which I think about my own head on this issue five years ago was if somebody had asked me, Robbie, what happens with your life if you get to the point where you're no longer capable of going to the bathroom or feeding yourself or those kind of things, then I would have told you.

I know I would have told you. Well, Medicare pays for that. But the government knew when they made this tax law, know that no Medicare doesn't necessarily pay for that. And there are stipulations to that.

And for many of my friends as I've watched them into that transition, it didn't pay for that, which left them in a really difficult place. And so it's fascinating to me that the government behind the scenes, unbeknownst to me, is aware of this need. And so they've put some tax stuff into place in order to help people to meet that need. Yeah, I mean, this thing passed overwhelmingly years ago, and this was part of it. It may have even been put into the bill just so the overall bill got passed because there's very few Congress people in voting on stuff that want to vote against helping people that are in need of long-term care. So regardless, it's a tax benefit that's there. You have to have the money to buy the stuff in the first place, which many of our listeners do.

And you really need to buy this in advance of when you actually need it. I mean, this isn't something you can buy at 87 and start using it at 89. Yet I don't want you folks in your 70s and even your early 80s to say, well, I'm too old for that.

No, you're not. Because we have things we can do in the late 70s and 80s with these kind of products to help you out and help you prepare, even if you've got some health conditions. But I want to stay at the core issue here.

The core issue is this is just one way to protect yourself for that. And we are experts on all of the available policies and how they work and which ones are appropriate for which people. I've made myself an expert on this. And then along with my staff and the folks that we all work together, we study this stuff. We talk to all these companies. We think about it. We pray about it.

And we pray when we're with the people, with the incoming clients. And just over the topic that you just went over, this is the core issue that we need to hit people with is do you think you need this stuff? That's really the question. Because over the years, I've been a little afraid to ask that question, because most people are going to just come out with, well, I don't think I need it, or I don't think I can afford it, or my kids are going to take care of me, or something.

I'm going to get a gun and shoot myself. Now, it's interesting to me, because the more I've processed it, the more I realize this is really truly denying myself. But it absolutely is. And all that stuff and all those what we would call in the sales business objections are all kind of self-protection, where they're in denial about it. And they're trying to protect themselves with logic of saying, I don't need it. I don't want it. I don't want to talk about it. And so what I've done through my whole career, but I haven't done this recently, is I've got all kinds of answers for all those things.

And that's also what people are trying to avoid. Who wants to go through that? And so before we get into really talking about what this is, which we'll do in the second part of the show, we'll get into the logic part, I really just need to ask you that question. Do you think you need this? Are you in denial about the fact that you might need it? You most likely will need it. Are you prepared to do something about it?

And I don't need a yes on all areas, but I just need a little bit of discussion about, and I'd really like to open up your minds and your hearts right now, before I get into the logic, get into the logic on the core issue. Is this something that I really need to prepare for? And the younger you are, the better. I just had a couple of people this week that were into me. They're listening to the show. They're down in the Charlotte area.

I met with them in our office down there. And the guy says, are we a little too young to be doing all this stuff? And the answer is no.

I mean, they were 58 and 57. And I said, you know, we maybe shouldn't do a financial plan yet, and we're going to charge for all that. But this is a perfect time to address long-term care and address life insurance, because you all are in great health. And the stuff is less expensive then. The younger you are, the less it's going to cost you. So there's a whole lot of benefits of looking at this at a younger age.

At the same time, if you just denied it and avoided it and you're in an older age, and now you're really taking it seriously, then that's fine. Don't rule yourself out on that. I'm too old for that. I'm too sick for that. Just tune in in the second part of the show.

Yeah. And a big part of this was that I needed, for me personally, came to the realization based on the stage of life I was in and taking care of my parents and Tammy's parents as they aged out. Like, man, I do not want to put my kids in the position that I've been put in. And then my parents didn't do it with any understanding of like, oh my goodness, it would be so much better to be able to meet my parents' needs with professional care than based on where we've fallen back to and be able to be the one that was visiting them and helping them and whatever.

And so part of the denial for me was I wanted to deny myself of anything and make sure that my kids had something that they could really think through in this process. So again, we got all the stuff coming at the end of the show where we're going to be talking about how the stuff actually works. So it's going to be great. But meanwhile, I want to tell you that today's show is, you know, obviously on long-term care, which is one of the seven worries there in the cardinal in Hans' book, The Complete Cardinal Guide to Planning for and Living Retirement. It's all there at cardinalguide.com.

And of course, he would love to hear from you. Anytime, in an email, Hans would send you out the entire book, whatever it is that you need, he would love to hear from you. And it's right there at cardinalguide.com.

We'll be right back. Hans and I would love to take our show on the road to your church, Sunday school, Christian or civic room. Here's a chance for you to advance the kingdom through financial resources by leveraging Hans' expertise in qualified charitable contributions, veterans aid and attendance, IRAs, social security, Medicare, and long-term care. Just go to cardinalguide.com and contact Hans to schedule a live recording of Finishing Well at your church, Sunday school, Christian or civic group. Contact Hans at cardinalguide.com.

That's cardinalguide.com. Welcome back to Finishing Well with today's show, Hybrid Long-Term Care. And on that note, Hans, what in the world is hybrid long-term care? Yeah. I mean, a hybrid is two things put together to make one. And usually something better.

Yeah, something better. Well, that's exactly right. There's a result that's after. And so this is really the addition of a long-term care benefit to a life insurance policy, or it's taking a long-term care policy and marrying it with a life insurance policy. And then the result is, is you have a policy that is going to pay a large amount when you die, just like any other life insurance policy does to your beneficiaries, tax-free, by the way. Life insurance benefits are typically tax-free to the beneficiaries. And then, so you got that, and that's in every life insurance policy. But then the long-term care part is you have the ability to take the death benefit early by the month if you need long-term care. So, you know, when they first came out with these, the sales pitch was live, die, or quit.

You say, what's up with that? I never really liked those terms a lot, but I actually use it. I guess I'm using it today. So the live part means that if you live a long time, you're going to be very happy you bought this, because if you live a long time, you're probably going to use the long-term care part of it. And if you don't use up all the life insurance part before you die, then your beneficiaries are still going to get what's left of the life insurance. But the whole thing around live is you're going to be real happy you bought it, because you're probably going to use long-term care if you live a long time. The die part is that your heirs are going to get more money out of this thing than you paid into it, substantially more money, just like any life insurance policy. So if you die, you're going to be glad you have this and you're preparing for that. And then the quit portion just means that if you decide you want this money back, sometimes you can't get all of it, but you can get most of it, you can just call the insurance company and say, I'm ready to quit. I want my money back.

And so it has that alternative. I have never had a client. I've been selling these since 2007, 2008.

I have never had a client call me, even call me up and inquire about it. You know that quit part? I put that money over here and I moved that $100,000 over here to get this long-term care.

And now I think I want it back. I really think that that provision is put in there by the insurance company is really just a sales tactic or a buyer's remorse tactic, or to sell you on the fact that you can move and do this thing. It doesn't make it bad because it's just saying, look, if you want to get out of this deal five years from now, or you need this money for something else, you can just come get it.

Nobody ever does. Who's going to cancel their long-term care insurance to get the money back? Yeah. Or their life insurance. Again, when you got that kind of deal, and the beauty of it is, is you don't know if you're going to die quickly after some short illness, or if you're going to, if it's going to go on for four or five years or whatever the situation is, and here you prepared for it in a couple of different ways and to an extent with a decent investment.

Well, here's the thing. You really need to buy 200,000, 250,000, $300,000 of life insurance to make these things worthwhile. It's a fairly large life insurance policy, a retired person and a person in their 60s, 70s, 80s.

That's the first thing. Then they have extension riders, so that if you actually need care, need the long-term care part, and you use up all the life insurance, then you have a benefit on there that it keeps on paying long-term care for several years beyond there. There's some pretty smart people that design these things, and that's all coming out of the original money that you're putting in there. These things have a large down payment or a large transfer of wealth because you're not really spending the money. I mean, you kind of are because you're giving it to the insurance company, and you're never going to ask it back until you need long-term care or you die, but the money is there. It's still in your name. You're just taking it from the bank or the stock brokerage or the IRA, and you're just moving it to the insurance company.

It was in one place, now it's in a new place, and then all these things start happening with it. Another piece of that is they've fixed these so that people that are in their 50s and 60s, they don't have to pay a large initial deposit. They can pay this over 10 years or 12 years, so if that initial deposit was $100,000, $120,000, they can pay over 10 years. We can write these for people and put substantial benefits, especially for one person, with $50,000 or with $5,000 a year for 10 years, but the way most people buy them is they make a large initial deposit, and it's usually their savings. It's usually their money that they have put back just in case that they're not really spending or using now, and so people tend to buy these things with a large initial deposit. You can even use your IRA money.

I mean, we've got a way to do that, and you won't get taxed all at once, so I don't want to get into too much of details. This was made possible by the Pension Protection Act, and then all the insurance companies created, and we have 15 to 20 different insurance companies that offer these types of hybrid long-term care life insurance policies, and then within those companies, they have four or five flavors of the thing, so as you can imagine, there's a whole range of options depending upon how people want to finance it, where the money wants to come, where they want to spread it over time, whether they want to make an initial deposit. So is there a difference in the, you know, because just as somebody doesn't know, long-term care can mean a lot of different things, so from a standpoint of the long-term care, is there different flavors of that? Meaning, like, how you get the care or what care you get?

Right. Yeah, I mean, so all of these policies, I don't sell them unless they pay for home healthcare. I don't sell it. There are a few versions where they only pay at a facility.

Well, who wants that? Because now, all of a sudden, to collect on your insurance, you've got to go to the assisted living when, at least in my own personal situation, that's going to be the last resort for me. I'm using home healthcare.

Right. And so most of the policies and all of the policies that I sell pay both ways, so they're going to pay for home health, which is a pretty wide range of subjects, how you're going to get that covered, I mean, how you're going to get that delivered, and then they pay for assisted living, which is the most desirable form of institutional long-term care, because a lot of these assisted livings really don't look like a nursing home, and they're really not a nursing home. They look more like an apartment that a bunch of elder people live, but there's people that come around and deliver the necessary care. Then they will also pay in a nursing home, and they'll pay for adult daycare and about anything else you'll dream up or that gets dreamed up in the future. I mean, they're doing this stuff with iPads and artificial intelligence, and the person still has to come over and care for you, but they can interact on video and kind of watch you and have you check in, which brings down the cost of the thing. Darrell Bock Right, and then there's the other issue of what turns it on, right? Because I know with some long-term care plans, you've got to where you can't feed yourself, you can't do this, you can't do that.

Are those variable as well? Dr. Darrell Bock Well, that's an issue that just about everybody brings up when they're looking at it, okay? And they bring it up many times from a negative standpoint because they've read, well, I've read about all these policies, and then the insurance company is going to give you a hard time about collecting. They're going to basically say you're not sick enough or you have to demonstrate.

So I think what you're asking is most of them have the test, which is the six activities of daily living, bathing, dressing, eating, transferring, toileting, and continence. So you've got six activities of daily living, and you need to show the insurance company that you can't perform two of them or more without human assistance. And I'm going to tell you, we help our clients file the claims, and I'm telling you the soft spot here is bathing and dressing. So when most people are ready to file a claim, what I do is educate the care coordinators, look, we need you to write out, and I don't need you to put anything that's untrue, but, you know, Myrtle here has this policy, and they're going to pay you to give the care.

And as long as you can put down and say this honestly that she needs help getting dressed, which covers a lot of ground, and she needs help taking a bath, even if that health help is just kind of getting her in there and getting her washed off and getting her clothes laid out so she doesn't put, somebody with Alzheimer's, they, you know, they put on things that don't match and that type of thing. So if you got two of the six, those are the two soft spots, and that's going to allow claim payment. It's just going to open up a claim. Now, the other side of that is a cognitive impairment. So there's many people that have dementia who can perform many of those six activities or all of them, but yet they need to be watched because they're going to set the house on fire or something. So the six activities get thrown out, and they just, you go under the cognitive impairment. So you just need a doctor to certify that they've got a significant cognitive impairment to where they need to be watched, and that opens up the floodgates for the policy.

Right. And see, again, as I'm sure you're listening, you're thinking, wow, I don't want to just buy this from somebody who seems to be selling all kinds of insurance. To me, I swear you're really blessed to have Hans, somebody that, he deals with this stuff every day.

He understands what these policies are saying and how to move within this system. So, you know, yeah, first we got to decide, do we need this? Do we want to deny that we can take care of ourselves clear to the end of life?

It's not easy to do, but yeah, that's probably true. And then once we do, we got to discern, God, put somebody in my life, right, that's going to be able to help me get stuff that is effective for my family, for the people I'm leaving behind, but also that, you know, turn it on when it needs to be turned on. And so, you know, again, that's why I want to remind you that this show is being brought to you by Cardinal Guide. So you just put guide after the Cardinal, cardinalguide.com. Of course, Hans' book, The Complete Cardinal Guide to Planning for and Living Retirement is so much like the Bible on how to finish well in this structure, okay, as far as, you know, making financial decisions as you reach this part of your life. And so, again, cardinalguide.com.

Hans, we ran out of time before we ran out of show once again. Okay, thank you. Finishing Well is a general discussion and education of the issues facing retirees. Cardinalguide.com, Cardinal Advisors, and Hans Shile, CFP, sell insurance.

This show does not offer investment products or investment advice. We hope you enjoyed Finishing Well, brought to you by cardinalguide.com. Visit cardinalguide.com for free downloads of this show or previous shows on topics such as social security, Medicare, IRAs, long-term care, life insurance, investments, and taxes, as well as Hans' best-selling book, The Complete Cardinal Guide to Planning for and Living in Retirement, and the workbook. Once again, for dozens of free resources, past shows, or to get Hans' book, go to cardinalguide.com. If you have a question, comment, or suggestion for future shows, click on the Finishing Well radio show on the website and send us a word. Once again, that's cardinalguide.com. Cardinalguide.com.